Return of the Silicon Kids

By Steve CollBy Steve CollMay 1, 1986

There was about it all the melancholy that arises when a grand reunion serves mainly to emphasize how much has changed.

At first, when the news sputtered out here last week that two of Silicon Valley's best-known computer hackers, Nolan Bushnell and Steve Wozniak -- cofounders respectively of Atari Inc. and Apple Computer Inc. -- were about to combine their once triumphant talents in a secret venture, an infectious magic spread over the Bay Area.

Programmers and engineers who had worked for Bushnell, 43, and Wozniak, 35, during the Valley's golden age placed eager phone calls to see if they could land jobs with the new enterprise. Radio talk shows buzzed with speculation about the collaboration. And reporters from Time and Newsweek arrived to document the historic news.

And no wonder. Nearly 10 years ago, Bushnell and Wozniak were gurus of the Valley, the first celebrity businessmen of the baby boom generation. Creative, whimsical and disdainful of button-down corporate culture, they were the symbols of a potent new era of high-tech entrepreneurship in America. Dressed in blue jeans and Adidas sneakers, they tinkered their way to millions and spent their riches on lavish rock concerts and California hot tub palaces.

But the Silicon Valley they once reigned over no longer exists. Apple Computer today is a sprawling Fortune 500 corporation run by an executive recruited from the soft drink industry. Venture capital managers with Ivy League MBAs hold the Valley's purse strings, and the Bushnells and Wozniaks have largely faded from view.

So as the word traveled that "Nolan and Woz" were going to merge their fledgling new companies (Bushnell's Axlon and Wozniak's CL9) and develop an unprecedented consumer toy product, the excitement that spread reflected a kind of nostalgic longing -- nostalgia for a time, grown from memory into myth, when companies sprang full-grown from the brows of hackers and the luckiest ones could make millions overnight.

"People say you can never go back," Bushnell says, summing up the challenge ahead. "I'm not sure."

After several days of rumor-mongering and confused leaks to the news media, Bushnell and Wozniak finally appeared at a climactic April 23 press conference. Bearded and casual in demeanor, they looked like a pair of aging California beachcombers recently returned from a long walk along the shore. But in Wozniak's still-adolescent appearance -- glasses, awkward features, clinging clothes -- and in Bushnell's singsong voice there remained a palpable vitality and enthusiasm, a sense of unlimited creative possibility. After all, even by California's unorthodox temporal standards, it was not so long ago that Wozniak helped launch the entire personal computer industry from a dingy garage and that Bushnell invented the first viable video game in a spare bedroom of his suburban tract house.

"I'm excited," Bushnell said at the press conference. "Wozniak has a well-known sense of humor as a prankster, which is almost as important as technology in the toy business."

And then . . .

Well, then it began to look as if the whole thing might be one of Woz's famous pranks. Word leaked out that the merger was off, that Wozniak was backing out. Bushnell's people scrambled to squelch that rumor, saying there were just some snags in the negotiations. Accusations were traded.

"The negotiations are proceeding on the merger," said Tom Zito, Bushnell's marketing vice president, on Friday. "What it boils down to is that there's a guy on the board of Cloud 9 [which is what CL9 is short for] who's opposed to it."

"That really is not true," countered Sam Bernstein, president of CL9. "Steve Wozniak's ownership of Cloud 9 is nearly 70 percent. Board members per se have no influence other than as opinion makers."

In the end, Bernstein predicted, the merger between Wozniak and Bushnell will probably go through. But the confusion and disharmony that followed the press conference was a reminder -- even to Wozniak's highest-ranking corporate officer -- that Silicon Valley's two original free spirits have had trouble in the past managing the practical sides of their businesses.

"You have two people who like to go past the detail and to the heart of the matter," Bernstein said. "And in this case, the heart of the matter was that they wanted to work together. And then they said, 'We'll put the two [companies] together. That'll take a day or two.'

"They're both a little naive about those kinds of things."

To the former stockholders of Pizza Time Theatres Inc., "a little naive" might seem a kind choice of words. Pizza Time was Nolan Bushnell's second company, the one he founded after being ousted from Atari in a power struggle. Initially, Pizza Time -- a chain of boisterous restaurants featuring video games, oversized robotic animals and a rat named Chuck E. Cheese -- enjoyed spectacular success. But after just a few years, former executives, directors, shareholders and stock analysts have charged, Bushnell seemed to lose interest in the details of running Pizza Time. The company plunged quickly into bankruptcy.

Since then, Bushnell has tried to repeat his earlier successes by starting more than a dozen video game, toy and technology companies. Bushnell claims about half of them have made him money, though none has come close to rivaling the early growth of Atari and Pizza Time. His current company, Axlon Inc., has had some success marketing a talking teddy bear and a menagerie of electronic animals called Petsters.

"I've always felt that I wanted to be a mix between a visionary and a good businessman," Bushnell said last weekend. "It's a little bit of a back to basics story for me . . . I've always believed that structurally, the future happens through toys and whimsy. If you look back, the things that have ultimately become necessities -- cars, for example -- all found their debut as a whim or a toy."

Like Bushnell, Wozniak has spent the past year or so investing a slice of his Apple fortune in an attempted comeback. In early 1985, he left the company he cofounded with Steven Jobs after its fast growth and new corporate caretakers left him with a diminished role. (Later that same year, Jobs also left Apple after a dispute with the company's new management.) In 1982 and 1983, Wozniak reportedly lost millions when he bankrolled the two extravagant US Festival rock concerts in Southern California. Cloud 9, his new company, has yet to develop a marketable product.

Perhaps together, Bushnell and Wozniak can do what they have been unable to accomplish on their own. But not everyone in the Valley believes that the past can be recaptured -- or that it should be.

"Nolan has proven that he is a creator of businesses and not a manager," says Roger Smith, president and chief executive officer of Silicon Valley Bank. "In the Valley today, people are recognizing their own limitations more. Companies are being founded where the creator agrees from the beginning not to be the president."

That, of course, will not be the case with Bushnell and Wozniak's new company, if it ever comes together. "I want to be an astronaut," is the metaphor Bushnell uses to describe his business ambitions. And the Valley's new culture of conformity and consolidation, in which there is little room for starry-eyed dreamers, frustrates him deeply.

"One of the things that hurt the Valley a tremendous amount was a huge amount of money chasing too little innovation," he says. "There was too much dumb money -- 'lemming capitalists' I call them. Once the venture capital firms were hijacked by the MBAs and the finance guys, you had no chance.

"It's true that when you throw a lot of money at a jerk, he can lose that money very quickly. They did that and now they're going to lick their wounds."

Still, it is also true that while few venture capitalists in the Valley would dare call Bushnell a "jerk," his own checkered business record played no small part in the rise of cautious investment and management practices.

"The guys with the gold make the golden rules -- and the venture capitalists have been burned in deals where they couldn't kick the founder out," says banker Smith. "There's probably less ego here today than there used to be. We won't be as visible as we used to be. There's a lot of behind-the-scenes or quiet wealth that's working today."

In other words, it's business as usual these days in Silicon Valley. Fundamentally, the land of Apple and Atari is no longer so different from the cluster of Fortune 500 headquarters in Westchester County, N.Y., or even the steel and glass boxes surrounding Detroit that house the nation's resuscitated auto companies. And not even the combined wizardry of Bushnell and Wozniak can change that.

But to Nolan and the Woz, capitalism's tendency to be boring is perhaps its most dangerous aspect. It was the pair's urge to play that made them rich, and even now, as middle-aged fathers, they cling with charming desperation to the freedom of childhood. The secret toy they intend to develop together -- known as "NEMO," an acronym for "Never-Ever-Mentioned-Outside" -- was inspired by the play habits of their own children.

"We're maybe not as egocentric as we were in the old days," Bushnell reflects. "Let's face it: the Apple II was a toy for Woz. The Atari VCS [videogame cartridge system] was a toy for me. The rest of the world happened to want them, too.

"But I think now we're making toys for our kids. I think it will go to a whole new generation."